'Rate shock' spreads across Pa.

JOHNSTOWN — When a third-party power generation supplier tempted Robin Hagins with a low rate in 2012, it was too good to pass up.

DAVID HURST

JOHNSTOWN — When a third-party power generation supplier tempted Robin Hagins with a low rate in 2012, it was too good to pass up.

Then, this winter, temperatures plummeted. And the Upper Yoder Township woman's electric bill seemed to rise just as fast.

"When I opened my bill, I was in complete shock," Hagins said.

The bill: $756.23.

"I thought it was an error," she said.

No such luck.

While the monthly energy usage in her three-bedroom home hardly budged from January, her invoice was $520 higher than the month before, she said.

As it turns out, she wasn't alone.

Thousands of electricity customers statewide enrolled in variable rate plans are outraged about their February bills, which have doubled and in some cases, tripled, from the month before.

Who's to blame?

Third-party suppliers and others in the industry agree that Mother Nature's frigid temperatures deserve at least some of the blame. Much of the country has faced near-record cold. And when temperatures dropped, demand surged.

But the mammoth bills also have attracted the state attorney general's attention.

The Public Utility Commission also is considering options that would further regulate marketing practices used by companies participating in the state's Electric Choice program — one that more than 2.2 million customers in the state enrolled in as of a month ago, the program's website shows.

"These spikes in the price of electricity are alarming and have put many consumers ... in a dire situation," Attorney General Kathleen Kane said. "We are looking at these price increases and will be prepared to take action to protect affected customers."

The nation's suppliers have blamed frigid temperatures for the increased costs. But they say blame also falls on the nation's energy transportation system, citing "inadequate" electric grids and gas pipelines that get congested when demand spikes.

"What customers are feeling are the results of a strained transportation and infrastructure system that delivers electricity and gas," the American Coalition of Competitive Energy Suppliers said in a media release.

"The underlying driver of the price spikes has been the eight-fold increase in electric costs in the wholesale market," added William Ulrey, spokesman for IDT Energy, a western Pennsylvania energy supplier.

Ulrey said the price his company paid for energy on Pennsylvania's hub — or power transmission market — jumped from $50 per megawatt hour to more than $400 "as a result of an unexpected demand surge."

He said his company is committed to resolving customer complaints "to the best of our ability."

For customers, the right market conditions can mean a significant savings through suppliers versus Penelec or other area utility companies, whose regulated rates are steady or only change quarterly, IDT and other companies note.

It can also send rates the other direction, Hagins and many others have learned.

Kane said her office has received hundreds of complaints. She added that a review is underway to determine if "price-gouging" might have occurred.

The Public Utility Commission does not regulate third-party suppliers' rates — only their business practices.

PUC officials have stressed that they believe in the open market system, saying increased competition is good for consumers. But the agency continues to stress that consumers should do their homework before switching to a new supplier.

Contracts stipulate that companies provide an outline of terms the company must follow in providing energy to homes and businesses. And because the state has not put a ceiling on variable rates, consumers can be susceptible to significant fluctuations, PUC press secretary Jennifer Kocher said, noting that fixed-rate plans are an option.

But many customers don't bother to read the fine print — or don't understand it, said Pat Tighe, owner of Vinco Pizza in Jackson Township.

The whole process can be confusing, she said.

"All of these changes they made — I just don't get it," said Tighe. "You have to deal with all of those phone calls from the electricity suppliers, the confusing paperwork."

Tighe said she entered into a fixed rate with a third-party supplier, so she hasn't had to worry about the winter price spikes.

"But what about the elderly? Some people are signing up for something they might not understand," she said. "Why does this have to be so complex?"

The PUC apparently has the same concern.

In a Feb. 20 hearing, the commission voted 5-0 to take a closer look at supplier practices. Among their considerations: compelling them to notify customers of price changes prior to billing and requiring more user-friendly disclosure statements. In cases where variable rate plans are offered, the agency may require additional information to clearly outline the risks, the PUC said in a press release.

Efforts to allow customers to switch providers more quickly — a process that can take several billing cycles in some cases — are being explored.

"A variety of regulatory requirements, technical issues and business practices can result in a switching process that lasts as long as 40 days," PUC Vice Chairman John F. Coleman Jr. and Commissioner James H. Cawley said in a joint motion to the PUC's Competitive Market Oversight office.

"Reducing this period will serve to mitigate adverse financial impacts from variable rate volatility."

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